Fisher Investments recaps the biggest market, political and economic news from last week, including US-China trade updates, UK politics and Japanese LEI numbers.
In the US, headlines continued to focus on the US-China trade dispute. In our view, these fears are overblown. While both sides continue to ratchet up political posturing, little has changed. As we’ve written, even if all tariffs take effect, the total impact would be approximately $146 billion—or 0.43% of combined US and Chinese GDP—far too small to derail the global economy and bull market. Then too, there are many ways to get around tariffs. For more, please see our 05/23/2019 commentary, “On Wiggles and Wobbles.” In economic news, the April Leading Economic Index (LEI) rose 0.2% m/m, in line with expectations. April retail sales declined 0.2% m/m after rising in March. New housing starts increased 5.7% m/m.
In the UK, Prime Minister Theresa May announced her resignation, effective June 7, kicking off a leadership election in the Conservative party amid ongoing Brexit negotiations. While uncertainty remains as to May’s successor and the resolution of Brexit, we continue to believe the UK economy and markets will benefit as businesses gain clarity. For more, please see our 5/23/2019 commentary, “May's End Heralds May's End.” In other political news, with EU Parliament elections underway, fears of populists’ ascent in the polls abounds. However, we believe populists’ rise pancakes the EU further into gridlock—reducing legislative risk. For more, please see our 5/22/2019 commentary, “How Populists, Despite Fears, Can Boost European Stocks This Year.” UK March unemployment fell 3.8% y/y, beating expectations. In the eurozone, the second reading of Q1 2019 GDP was released, showing growth of 1.2% y/y, as expected. April core consumer prices (excluding food) rose 1.3% y/y—more than expected. March industrial production fell 0.3% m/m, in line with forecasts.
In Japan, the preliminary March LEI fell to 96.3, but beat expectations. March retail sales were revised to 1.0% y/y, more than the consensus. April Chinese industrial production increased 5.4% y/y, declining from March and below forecasts. April retail sales grew 7.2% y/y, also below estimates and decelerating from the previous month.
The Week Ahead:
The US reports the second reading of Q1 2019 GDP. The UK and eurozone both release money supply data. EU parliamentary election results are expected after May 27. Japan posts revised March LEI and preliminary April retail sales and industrial production. China announces May services and manufacturing Purchasing Managers’ Indexes.
Tip of the Week: Fisher Investments’ offices will be closed on Monday, May 27, 2019 in observance of Memorial Day.
Source for all data cited is FactSet. This update constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice. No assurances are made we will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. In addition, no assurances are made regarding the accuracy of any forecast made herein. Global equities are represented by the MSCI World Index. The MSCI World Index measures the performance of selected stocks in 23 developed countries and is presented net of dividend withholding taxes and uses the maximum rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets.